DBIT 402 COST ACCOUNTING.

UNIVERSITY EXAMINATIONS: 2021/2022
EXAMINATION FOR THE DIPLOMA IN BUSINESS INFORMATION TECHNOLOGY
UNIT NAME: COST ACCOUNTING, UNIT CODE: DBIT 402
DATE: DECEMBER 2021 TIME: 3 HOURS
INSTRUCTIONS: ANSWER QUESTION ONE AND ANY OTHER TWO

QUESTION ONE (20 Marks)
a) Discuss Methods of reappointment of service department overheads
(5 Marks)
b) The following information was obtained from the books of ABC Ltd
Budgeted        Actual
Direct material 600,000 650,000
Direct labour 1,000,000 1,150,000
Overhead 800,000 900,000
The company is engaged in a process that will produce a product whose cost details are as
follows:-
Job No. Y200
Ksh.
Direct materials 120
Direct labour 150
Total 270
Required:
i) Calculate the OAR
ii) Calculate the over/under absorbed overhead
iii) Determine the selling price of job number Y200 given that the company has a
policy of 20% mark-up. (the company absorbs overheads on the basis of direct
labour cost) (10 Mrks)
c) Discuss six Benefits of material control (3 Marks)
d) Discuss four General assumption of CVP analysis (2 Marks)
QUESTION TWO (15 Marks)
A modern company Kiangagwa Limited has 4 departments A, B, C and D. The actual cost for a
given period was extracted from their books as follows:
Costs
(ksh.‘000’)
Indirect materials: Department A 950
Department B 1,200
Department C 200
Department D 1,500
Indirect labour Department A 900
Department B 1,100
Department C 300
Department D 1,000
Rent 2,000
Repairs to plant 1,200
Depreciation of plant 900
Lighting expenses 200
Supervision 3,000
Insurance of stock 1,000
Employees insurance (employer’s liability) 300
Power costs 1,800
Employees personal expenses 1,500
Total 19,050
The following data is also available in respect of the 4 departments:
Dept. A Dept. B Dept. C Dept. D
Area (m2)                 150     110         90               50
No. of workers          24         16       12                 8
Total wages (Ksh. ‘000’) 8,000 6,000 4,000 2,000
Value of plant (Ksh. ‘000’) 64,000 18,000 12,000 6,000
Value of stock (Ksh. ‘000’) 15,000 9,000 6,000 —-
Kilowatt-hours 45 15 20 20
Required:
Apportion the above costs to the various departments on the basis of the most equitable basis.
(15 Marks)
QUESTION THREE (15 Marks)
a) Discuss 5 Advantages and disadvantages of decentralized purchasing (5 Marks)
b) Explain five characteristics of Just In Time Inventory System (5 Marks)
c) Explain six challenges experience when using Just In Time Inventory System
(5 Marks)
QUESTION FOUR (15 Marks)
e) Discuss six significance of cost accounting (6 Marks)
f) The following information was obtained from the books of ABC Ltd
Budgeted            Actual
Direct material 800,000      650,000
Direct labour 2,000,000       1,150,000
Overhead 1,000,000           1,100,000
The company is engaged in a process that will produce a product whose cost details are as
follows: –
Job No. Y200
Ksh.
Direct materials 120
Direct labour 150
Total 270
Required:
i) Calculate the OAR (2 Marks)
ii) Calculate the over/under absorbed overhead (3 Marks)
iii) Determine the selling price of job number Y200 given that the company has a policy of
20% mark-up. (the company absorbs overheads on the basis of direct labour cost)
(4 Marks)

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